January 30, 2012 - Casey's General Stores, Inc. (CASY-NASDAQ), together with its subsidiaries, operates convenience stores under the Casey's General Store, HandiMart, and Just Diesel names in 11 Midwestern states, primarily Iowa, Missouri, and Illinois. Its stores offer food, beverages, dairy and bakery products, sandwiches, fountain drinks, donuts, cookies, brownies, Danish rolls, ham and cheese sandwiches, pork and chicken fritters, sausage sandwiches, chicken tenders, popcorn chicken, breakfast croissants and biscuits, breakfast pizza, hash browns, quarter-pound hamburgers and cheeseburgers, and potato cheese bites.

Casey's stock price has slowly but steadily gone higher over the last 3 years. In March of 2009, like all other stocks, it got hit hard, bottoming at $18.30 a share. It's been up ever since with minor pullbacks along the way. Can it keep the upward trajectory?

Earnings suggest it can. In 2008, they were $1.81 a share. Last year, they finished at $2.59. For 2011, (fiscal year ends April 30), 7 analysts have a consensus estimate of $3.10, up 19.69%. For 2012, they forecast $3.49, up another 12.58%. For the January quarter (third), they see 45 cents compared to 37 cents last year in the third. For the final quarter, they expect 64 cents vs 60 cents last year in the fourth. Over the last 5 years, average annual earnings increases were 21.35%. Over the next 5, analysts expect growth, on average, to be 10.27% a year.

Margins widened in the last several quarters on gas sales, the largest contributor to revenues. There were also more in store promotions to bolster the top line. New stores opened, and a more profitable product mix helped as well. Expectations are for all these factors to continue in 2012.

Some margins on certain products were squeezed, ones like cigarettes where competitive pricing remains a factor. Also, the cost of cheese has gone up, putting pressure on the Prepared Foods segment. Other commodity prices were higher, ones like coffee beans, flour, and meat. If the economy continues to heal, expect price hikes to mitigate these higher costs and increase margins again.

No matter how bad the economy, Casey's continues to expand, in earnings as well as store openings. In 2010, the company spent $215 million on new stores. Management expects to increase that budget with new store construction accelerating for the next several quarters as well as adding kitchens to recently acquired store fronts. The company owns large land holdings in Arkansas, Kentucky and Tennessee, states where the company looks to expand.

There's a dividend attached to this stock, one that pays 60 cents a share. That's more than double the 28 cents paid in 2008. There's a steady upward trend for the annual payout. Yield here is 1.1%. It takes 19% of earnings to pay the dividend.

- Essential Numbers:
- Market Cap: $2.0 billion
- Trailing P/E: 17.88
- Forward P/E: 15.05
- Price to sales ratio: .33
- Price to book: 4.24
- Operating margin: 3.54%
- Profit margin: 1.85%
- Return on equity: 26.52%
- Revenues last 12 months: $6.09 billion
- Total cash: $86.2 million
- Total cash per share: $2.27
- Total debt: $680 million
- Current ratio: .97
- Book value per share: $12.43
- Beta: .80
- 52 week change: 23.22%
- Total share outstanding: 38.06 million
- Float: 37.88 million
- Held by insiders: .48%
- Held by institutions: 87.5%
- Dividend: 60 cents
- Yield: 1.1%
- Payout ratio: 19%

Casey's is still small. Institutions own a large chunk of it. That can be good if they keep buying. But if they decide to sell, a lot of shares can hit the market at once, driving down the price. In the last quarter, the stock moved up 10% so much of the good is already baked into the price. Expect more solid earnings from this well managed company, and most likely higher prices on the stock.

- Company Web site: www.caseys.com